How to track your expenses for FIRE: Spending tracking app vs. excel/google sheets?
Why bother tracking your spending?
On our journey to FIRE we’ve found tracking our spending to be an incredibly important step. This is for two main reasons.
Firstly, accurately knowing how much you spend is crucial to calculating your FIRE number. Without knowing how much you spend, it’s impossible to know how much passive income you’ll need to retire early.
Secondly, we track our spending so that we can monitor and modify it. By categorising our spending, we can get a clear picture of how our financial resources are being utilised, evaluate whether this is in line with our goals and values, and adjust accordingly. It’s about raising our level of consciousness around our consumption.
But the most surprising benefit that I’ve found since beginning to accurately track my spending about two years ago, is the discovery of hidden costs and easy substitutions. As soon as I started reviewing my spending at the end of each month, I began realising that there were a lot of things I was paying for that I had totally forgotten about, or hadn’t noticed. There were subscriptions – Evernote, youtube, etc – that I’d signed up to years before, but had never asked myself, ‘Do I really still need this?’, there were also buying habits I’d built that I could easily modify and save big on. As a result, I’ve saved myself hundreds through budget tracking, simply by eliminating hidden costs, and systematically substituting to more price efficient consumption options over time!
I tried Spending Tracking Apps
When I started the budget tracking journey I started off googling, ‘How to track my spending’, and ended up trying out a few tracking apps. I tried pocket book and a few others, but I found that they all had the same set of problems.
Problem 1, the automation wasn’t automated: I found that they would auto-categorise items in ways that I didn’t want, and there was HEAPs of stuff that would just end up uncategorised. I tried to change the categories, but the process was super clunky and time consuming.
Problem 2, the categories weren’t find grained enough: the apps that I used could see I was shopping at Coles and told me I was buying groceries, but that’s not that helpful. I could be buying pre-packaged meals for $7 a pop, or I could be buying a week’s worth of rice for $7. One is much more FIRE friendly than the other, but these tracking apps didn’t give me data that was fine grained enough to tell the difference. I wanted specific detail that wasn’t available.
Problem 3, automation is not the goal: The premise of many o these apps is that they aim to automate the process of budget tracking. The problem is, this wasn’t my goal. As mentioned, a big part of budget tracking is raising your awareness to how much you’re spending, and what you’re spending it on. Manually making an entry each time I spend money helps me to raise my awareness and helps me to spend more consciously.
The solution? Google sheets
The only real option was a spreadsheet. Spreadsheets are flexible , infinitely customisable, and overcame the three big problems with tracking apps mentioned above. Google sheets beats excel because sheets it’s on my phone with me wherever I go! (Google sheets app for Android, and for iOS)
So I set out to build a spreadsheet! I wanted the spreadsheet to allow me to do a few different things. These were
- Set my own categories
- Quickly and easily enter my spending (e.g., was there a way to automate a timestamp?)
- Quickly and easily view a summary of my spending for the year to date (including what that averages out to on a daily, weekly, and monthly basis)
- Generate monthly summaries to enable me to compare months.
It took a while, but I now have a simple and easy to use version that I’m happy to share with you below!
Our Google sheets budget tracking template – Create your own version
Below is a walkthrough of how to use the spreadsheet. It shows you how to set your categories (see the section on creating categories below), how to enter your spending, how to view a summary of your annual spending, and how to generate a summary of a specific time period.
How to set your categories
Setting your categories is a crucial step, and it’s one that people often struggle with. ‘How much detail should I have?’ There’s a tricky balance to strike, too many categories is really annoying to keep track of, but too few provides insufficient detail.
The following set of questions should help you to create a list of categories that strikes the perfect balance between detail and efficiency. As you read each of these questions, write down any categories that come to mind:
- What might I be spending too much on that I want to cut down on? (e.g., sugary snacks, coffee, smashed avo)
- What might I be spending too little on that I want to increase my spending on? (e.g., fresh fruit and vegetables)
- What expenses is it hard for me to get an intuitive sense of? (e.g., car ownership has a lot of hidden costs, travel often adds up to much more than first anticipated, and healthcare spending is irregular)
- What are my big ticket items that I need a clear picture of? (e.g., rent, mortgage, etc)
Once you’ve asked yourself these four questions, and generated a set of categories for each, you should have a pretty good list of categories to work with (you can crosscheck against my categories in the next section also).
Good luck with your spending tracking, I hope you find this spreadsheet helpful, and if you have any questions about how to use it, please feel free to shoot me an email. My email is on our about page.
Bonus: My categories and spending breakdown over 2019 and 2020
By way of example, here’s my category list from 2018 and 2019.
| 2019 categories | 2020 categories |
| beggars (i.e., money given to beggars. I just put this under ‘donations’ in 2020) | alcohol |
| bills (gas, water, electricity, etc) | bills |
| books | books |
| bread | car costs |
| car costs | clothes (new) |
| clothes (new) | clothes (second hand) |
| clothes (second hand) | consumer durables |
| consumer durables | donations |
| donations | eating out |
| drink (alcoholic) | entertainment |
| drink (non-alcoholic) | financial services |
| eating out (sit down meal or eating with friends) | groceries |
| eating out (snacko, e.g., pasties) | haircut |
| entertainment | healthcare |
| fresh fruit | house/cleaning/maintenance |
| fresh veggies | insurance |
| haircut | membership |
| healthcare | other |
| home cooking ingredients | phone |
| insurance | presents |
| membership | PT |
| nuts | quakers |
| phone | rent |
| presents | side hustle |
| PT | subscriptions |
| quakers | sweet snack or drink |
| rent | table tennis and associated costs |
| rice/soy milk | toiletries |
| savory snack | travel (for family/friends event) |
| school related costs | travel/adventure |
| side hustle | Uber/cab |
| subscriptions | work associated costs |
| sweet snack | |
| table tennis and associated costs | |
| toiletries | |
| travel (for family/friends event) | |
| travel (holiday) | |
| Uber/cab | |
| work associated costs |
Between 2019 and 2020 the main category change I made was condensing all of my grocery spending (rice milk, nuts, fruit and veggies, etc) into ‘groceries’ (though I still kept ‘sweet snack or drink’ separate). I found I was happy with my grocery spending breakdown, and didn’t need my grocery data to be that detailed. Plus, it was super annoying adding up the different parts of my receipt each time!
For interest, here’s a comparison of my spending breakdowns across 2019 and 2020.
Two quick notes of explanation. Firstly, my second biggest cost in 2019, rent, has disappeared in 2020. This is because at the start of 2020 I took on the lease for an entire 5 bedrooms house, and I’m currently subletting the rooms (with the landlord’s approval). I charge a bit extra on the rooms and I act as the ‘house manager’, paying and managing all bills and maintenance, changes of housemates, and organising a fortnightly cleaner. This has enabled me to totally eliminate my housing costs for 2020, which has been awesome. (If you choose to do this, it’s really important to be transparent with your subtenants about the arrangement)
Secondly, ‘financial services’ is fourth highest so far this year because I set up a discretionary family trust through which to make our share purchases, which cost several hundred dollars. This was on top of a Sharesight and Barefoot Investor subscription.
I’m also happy to report that my largest expense is my charitable donations. You can read about what inspired me to make this commitment to giving here.
Happy spending tracking!
ps: Once you’ve supercharged your saving, you need to work out where to put it! If you’re trying to work out how to invest, you may like to read this article on how to build an ethical share portfolio for FIRE next!